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Sprint Bets Big On the iPhone 366

Posted by Soulskill from the over-a-barrel dept.
hazytodd was one of several readers to tip news of Sprint Nextel's plan to grab a piece of the iPhone action in order to halt the company's downward slide. According to a Wall Street Journal report, Sprint has committed to buying 30.5 million iPhones over the next five years (summary of paywalled WSJ story), which at retail rates works out to roughly $20 billion. "To sell that many iPhones, Sprint would have to double its rolls of contract customers, convert all of them to the Apple device or a combination of the two." A separate rumor at Boy Genius Report suggests the iPhone 5 may be a Sprint exclusive until sometime next year, with Verizon and AT&T getting the upgraded iPhone 4S until then. Apple is holding an event to unveil the new phone tomorrow.
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Sprint Bets Big On the iPhone

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  • Guess they're banking on the public loving apple, let's see how that bet holds out.

    I think $20B is out to lunch though, I'd expect bulk rate if I ordered 30 MILLION widgets.

    • That's why the article said that it's $20billion AT RETAIL. Of course Sprint is going to get them cheaper. You can't turn a profit any other way.

      • Re:All in (Score:5, Insightful)

        by Bill, Shooter of Bul ( 629286 ) on Monday October 03, 2011 @05:04PM (#37594104) Journal

        Yes you can, you charge the customer more than you pay and hide the extra in the monthly charges. Some phones are free to consumers.

        Do you really think the phone companies were paid by the manufacturers to distribute those phones?

        Now, does that mean they paid retail? Not necessarily or even probable, but your reasoning was just silly wrong.

        • Re: (Score:2)

          by darrylo ( 97569 )

          Uh, you're in violent agreement with The123king. There's nothing he said that conflicts with what you wrote.

      • Re: (Score:2)

        by raehl ( 609729 )

        For the iPhone, retail price is likely essentially equal to the price Sprint pays. Phones are loss-leaders, not profit centers.

        • Uhhhhh - twenty billion dollar loss leaders? Alright - if you say so. Let me look again, and count those zeros. Yep. Twenty Billion - not million. Oh-kayyy - loss leaders. If you know what you're talking about, they are taking one HELL of a gamble!

          I suspect that those phones are going to be sold at some kind of markup. Maybe only a slight markup, but a markup all the same. No company can afford to take a loss on that much investment capital. Especially considering the number of returned phones, for

          • He does know what he's talking about. The telco's make anywhere from 5-20% margins on any of those phones. The iPhone I think is around 10% gross margins, which means by the time you deal with your own distribution channels and activating it etc you're just covering costs.

    • That's ridiculous. I love my iPhone, and my contract has been up for 4 months or so. When the iPhone 5 comes out on AT&T, I'm getting one. But switching carriers for it? Hah! General hassle aside, I'll be damned if I'm giving up my grandfathered unlimited data plan.

      Would Sprint really think that it'd be worth a risky deal that, chances are, will never pay off? Making a 5-year commitment in order to get a 6-month head start, where everyone knows they can just wait? In a market where most people are on a

      • Re: (Score:2)

        by Lumpy ( 12016 )

        your grandfathered unlimited plan is dead jim... the only people clinging to it are the fools.

        they throttle you MAJOR HARD when you get past their 2GB plan's data point. I'm talking 56K dialup hard with latency so bad that even twitter is painful to use.

        Stop spending an extra $5.00 a month for something fake.

      • My contract is up with AT&T and my 3GS is showing it's age so there's a very high probability that I'm getting the next iPhone. I hate AT&T though, as it's pretty expensive. Right now I pay 160 bucks for two phones (one normal, one iphone). The wife pays 100 bucks on her Verizon phone. So that's $260 going out for cell phones which is crazy.

        Like you I had the unlimited data plan but had to ditch it as I needed to add on tethering for my laptop (didn't jailbreak, went the official route). It see

        • So that's $260 going out for cell phones which is crazy.

          Holy crapola, that is crazy. My friends make fun of me because it costs me something like $0.20 to send a text and $0.10 to receive a text, and I don't have GPS or usable WWW access. But boy, I feel better about all of that when I pay $35-38/mo.

  • ... that's all in. whoever made that bet should be standing up right now.

  • Who keeps the same phone for five years?

    Redo the math considering that people repurchase iphones every 18-24 months...

    • Who keeps the same phone for five years?

      Redo the math considering that people repurchase iphones every 18-24 months...

      I am pretty sure my family is atypical; but until we got new phones this year (when we switched to pre-paid), we were still using the phones we'd gotten in 2004.

    • Re: (Score:2)

      by tepples ( 727027 )

      Who keeps the same phone for five years?

      I do. I have an Audiovox 8610 dumbphone, and I save 90% on my cell phone bill compared to a smartphone.

      • I save 90% on my cell phone bill compared to a smartphone.

        You can see why operators want to dump customers like you for internet junky iPhone users then :-) ?

    • Re: (Score:2)

      by Lumpy ( 12016 )

      I have a 8 year old Iridium phone that is still active and grandfathered into a pay per minute plan.

      who keeps the same phone for 5+ years? people that buy real phones instead of the consumer toys.

      • who keeps the same phone for 5+ years? people that never use their phone instead of those who want something useful.

        FTFY

    • Re: (Score:2)

      by Cyno01 ( 573917 )

      I do. I went from a nokia 3310 to a moto razr to an iphone 3gs. Basically the 3 most popular phones ever.

  • I really gotta wonder what their executives are thinking. Why not do something to earn the market share like:

    • Providing more price-competitive packages.
    • Providing better service.
    • Upgrading network capacity.
    • Providing better 4G caps than the competition.
    • ?

    Honestly, expecting the sales of iPhone to be the salvation of the company is such naive wishful thinking it's scary. It's a sign of management that has no real ideas about how to be competitive, but only how to be a "me too" provider.

    • Re:What are they thinking? (Score:4, Interesting)

      by Missing.Matter ( 1845576 ) on Monday October 03, 2011 @04:53PM (#37594016)
      Are they not doing any of that? I'm not a sprint customer, but I've been thinking of switching. They seem to be the only carrier left with an unlimited data plan, their rates seem fairly competitive, and at least in my area coverage is complete (although I don't know how it is around the rest of the country). Considering the iPhone's popularity, perhaps not having it really is limiting their growth. Perhaps maybe $20B is a comparatively cheap way of growing their market share (compared to infrastructure improvements, for example).
    • Sprint already has very low rates and no caps. Service and capacity, I don't know. But the other two, they have.
      • Both AT&T and Verizon had no caps before iPhone was offered... I would be very surprised if Sprint continued to do so.
        • Considering that they've made it a huge part of their advertising, I'm guessing that Hesse really means to carry through with it. I don't rate his chances as all that good, but considering that the alternative is to sell the company to Verizon, it's probably not a real waste of money. Verizon isn't going to pay much more than the value of the physical plant + spectrum licenses, and those are worth money even if the company tanks.
      • Customer service is good - I've had billing / account issues and never had any hassles at all or been on the phone more than 10 minutes, TOPS (it's usually under 5 minutes to work out an issue). I'm not sure what you mean by capacity though.

    • I know one thing that they'll be thinking - no WP7 or Android phones for sale in their stores, or at least, tucked away in the far corner and the salesmen given instructions (and bonuses) to shift iPhone stocks.

      You thought it was going to be hard for Windows Phone to get some market share before, it just got a lot harder.

      • Re: (Score:2)

        by mldi ( 1598123 )
        Which is completely ridiculous considering how profitable Android phones have proven to be, and how WP7 phones have the potential to be. I realize the iPhone draws up a huge number of sales but not more by itself than everything else together. They surely shouldn't be giving all their other customers the shaft by dropping benefits and customer attention just to please the Great Turtleneck. The rest of us are basically paying extra now just so Sprint can get the damned iPhone.

    • Re:What are they thinking? (Score:5, Interesting)

      by Miamicanes ( 730264 ) on Monday October 03, 2011 @05:09PM (#37594130)

      > Providing more price-competitive packages.

      Compared to what? Sprint has plenty of warts, but price (at least, for individual customers with no family plan and exactly one phone who'd burn through AT&T and Verizon's caps within a matter of days and are perfectly cool with $69.95 + $10 for 450 minutes of peak airtime, and more or less unlimited everything else) isn't really something I'd classify as one of them.

      > Providing better 4G caps than the competition.

      Root your phone like everyone else, and the 4g hotspot caps are meaningless. Sprint chose that specific group very carefully -- the nontechnical users who actually go out and PAY for an official hotspot plan are almost exactly the same group who'll try to use their phone as their one and only means of internet access.

      Sprint isn't stupid... they know the overwhelming majority of users who root, reflash, and tether for free already have the most expensive cable or DSL internet access they can buy, and use it instead of their Sprint data service when they're at home just because it's faster and works better. To repeat: Sprint really doesn't care about users who tether once in a blue moon so they can get online with their laptop at an airport somewhere while waiting for a plane. Sprint passionately cares about users who try to use tethering as a substitute for real internet service and 21st-century dialup.

      Nobody who has high-end internet access at home is going to screw around with torrenting from a tethered phone, because it would be slow, suck, and annoyingly cause most of your incoming calls to end up going straight to voicemail. Likewise, statistically nobody with the means to tether is going to stream lots of HD video, because it's not free -- users who tether for free rip their content from Blu-Ray, convert it to .mkv, copy it to their 32-gig Class 10 microSD cards, and watch it from THERE. Sprint is one of the few carriers who understands that the users who can most easily subvert any controls they try to impose are likely to be the ones who fall towards the lower end of total monthly data use, simply because those users have better ways of getting online anyway.

      > Upgrading network capacity.

      No arguments there. Sprint definitely has plenty of room to improve in that regard.

      • Agreed completely.
        My iphone data usage is ~300 MB/mo. I use netflix app daily.
        My wifes is closer to 3 GB/mo. she just browses the web.

        the reason? I have wifi on at home and at work.
        she doesn't know what wifi is. the phone either works or it doesn't for her. I tried explaining that LOLCATS will load faster if she goes on the wifi, but if it involves doing ANYTHING, pressing a single button, she won't do it.

        • Doesn't it automatically switch over to wifi when available (i.e., not involving pressing a single button)?

          • Re: (Score:2)

            by tepples ( 727027 )

            Doesn't it automatically switch over to wifi when available

            Not if the user has turned off the Wi-Fi radio to save battery charge while away from Wi-Fi. Or should it know where to turn the Wi-Fi radio on and off based on GPS?

            • Or should it know where to turn the Wi-Fi radio on and off based on GPS?

              If you use Tasker on Android, you can program it to do exactly that. I do. I also programmed it to set my phone to silent when I get to work and turn the volume back up once I leave work.

        • iPhones don't support connecting to remembered networks automatically?

      • Except that other carriers will track your unpaid tethering and either charge you extra or disconnect you. Sprint on the other hand does a *wink wink* *nudge nudge* deal with their $10 "premium data fee" and they don't give a rats ass if you root and then tether for free.

    • I really gotta wonder what their executives are thinking...

      How many customers has Sprint lost because they cannot offer them the iPhone, how many sales to new customers do they continue to lose each day ? Apple sold 20.34 million iPhones in Q3 2011 [apple.com], let's say US sales amount to half that, those are all people who in all probability don't even consider going to Sprint because they chose their (i)phone first and carier second.

  • ...some company has made a contract with some other company based on the belief that a lot of people are going to buy mobile phones in the reasonably near future.

    Meanwhile some other company are ordering a lot of flat meat-like substances based on the belief that lots of people will buy hamburgers in the near future.

    Big deal!
  • unlimited plans that are, well, unlimited. I really hope that they mention that talking point heavily in their advertising.

  • iPhone 5 may be a Sprint exclusive (Score:3)

    by shutdown -p now ( 807394 ) on Monday October 03, 2011 @05:01PM (#37594074) Journal

    The idea of iPhone 5 being a Sprint exclusive doesn't make any sense whatsoever. Obviously it would be great for Sprint, but I don't see what Apple would get from such an arrangement, other than a horde of pissed off existing customers who have a shiny new toy dangled in front of their face and then told that they can't have it right here and now.

    • Exactly. Unless Apple is really worried about Android (or perhaps RIM, but certainly not Nokia^HMicrosoft). And they don't seem to be that worried.

      But here we are again, playing "Wack an iPhone". Apple hasn't even formally announced the damn thing yet.

    • Re: (Score:2)

      by Macrat ( 638047 )

      but I don't see what Apple would get from such an arrangement

      A load of cash from Sprint?

      • That would be a very huge load of cash, to compensate for all the lost sales.

        So huge, in fact, that I doubt Sprint would have that much to spend.

        • Re: (Score:2)

          by Macrat ( 638047 )

          That would be a very huge load of cash, to compensate for all the lost sales.

          A big assumption on your part. Apple has had no trouble selling iPhones so far.

          • That's my point exactly. Apple has had no trouble selling iPhones through AT&T and Verizon with no exclusivity deals. Why have one now, especially when it'll mean that existing customers (a considerable number of which would otherwise buy iPhone 5) would be locked out of it - because even among Apple fans, few would switch to Sprint just so they could get a new iPhone.

            • Re: (Score:2)

              by j-beda ( 85386 )

              Maybe Apple knows it won't be able to keep up with demand for some time and that being exclusive to whoever will still allow them to immediately sell every single device that comes off the end of the production line.

              If that is the case, the exclusivity deal might actually be of value to Apple even without a truckload of cash as a payment. Having the newest model for sale everywhere, but unavailable anywhere is actually pretty bad from a PR point of view, The "fanboys" on the "other" carriers would possibly

  • Why would Apple do this? (Score:3)

    by 93 Escort Wagon ( 326346 ) on Monday October 03, 2011 @05:17PM (#37594164)

    I call shenanigans.

    Apple has had no problems selling all the iPhones they can make - so what would they gain by doing this? It seems like, if anything, they'd lose potential income, given that Sprint would almost certainly be paying less than retail.

    • Sprint pays them extra for exclusivity while Apple ramps up production.

      • Yes but it would have to be a lot of freaking money. Currently Apple sells 20M a quarter which is estimated to be $12B revenue/$3.6B in profit per quarter. Assuming the earliest AT&T/Verizon customers get their iPhone would be January 1, 2012 that's at least a quarter. I don't know how many lost/delayed sales that translates to but at 10% it's still $1.2B revenue/$360M profit. The other thing that doesn't make sense is the current rumor is the next iPhone is dual mode CDMA/GSM. So there would be n

    • I think Apple has a fair amount to gain here - if they are doing something creative.

      Think of the introduction of the original iPhone. Apple negotiated an exclusive deal with AT&T in exchange for a share of the revenue AT&T received from the monthly contracts. Of course, AT&T hated that deal and got out of it as quickly as possible.

      Sprint is just desperate enough to try something like that - expecially if they could pick up an exclusive version of the iPhone (perhaps a 4G version or a iPhone 5

      • It only worked in 07 because smartphones were so very terrible, and the iPhone was the only decent one. The iPhone 5 is competing with itself and a truckload of Android phones, and someone who wants an ATT or Verizon smartphone already has options. Apple will just lose out on the upgraders, who will hold out rather than switch.

    • Maybe Apple simultaneously developed three iPhone 5s: one with WiMAX, one with LTE, and one with HSPA+? Maybe the WiMAX model came out of production first (why, who knows/cares)? Maybe Apple is taking advantage of the situation this way?

    • Well I have my doubts, but they may have a few reasons for doing this. First, it's possible that the specifics on this deal make it beneficial for Apple. Remember that it's not just about selling enough phones-- Apple's original deal with AT&T was supposedly the result, in part, of AT&T being willing to forgo AT&T branding, provide unlimited data plans, and to work with Apple on "visual voicemail". It may be that Apple has an unannounced feature that required carrier cooperation and Sprint wa

  • So Apple goes to ATT and says "Sprint's offered to buy 30 million iPhone 5s if we go exclusive with them, can you make a better offer?" ATT giggled to themselves and said "No thanks" Then promptly called a board meeting to discuss buying Sprint after their stock tanks sometime next year. They'll get all their subscribers and the Apple contract for less than the contract itself would have cost them.

  • I don't believe it, but here's why it's a bad idea (Score:4, Insightful)

    by gabeman-o ( 325552 ) on Monday October 03, 2011 @06:05PM (#37594460)

    - BGR says that the exclusivity will only last until Q1 2012... very short lived for a $20bil investment
    - No iPhone 4 users (except people who purchased out of contract) will even be able to switch without paying a hefty penalty, making it nearly impossible for Sprint to win over a good chunk of the current iPhone users. Why is this important? Many of these people are early adopters. Luring them to Sprint for a 2 year commitment would be a huge win for Sprint. My guess is that the market for the iPhone 5 is much bigger for those that already have an iPhone 4 than those who don't. Even if the exclusivity was for an entire year, it would be just in time for upgrade window and contract ending for the current crop of iPhone 4 owners.
    - Sprint is a discount provider, along with T-Mobile. They really do not compete at the same level, in terms of service and coverage, as AT&T and Verizon. People are less likely to switch from AT&T & VZW to Sprint
    - For the above 2 reasons, hitting the kind of sales that Sprint needs to make that commitment to Apple seems unlikely
    - The article pegs the Sprint version as a WiMAX phone. Sprint has already said that their strategic direction for 4G is LTE. Why would Apple or Sprint invest $20 billion in a technology (soon to be) in decline?

    If Sprint is indeed doing this, they are betting the farm on the iPhone 5. If I was a shareholder, I'd be concerned.

  • $655 each?? That is more than a 3G iPad at retail.

    You would think with a volume of 30 Million+, you could get a a big volume discount.

  • Hey sprint, Give me 2 of the new iphones at $99.00 each and the same plan as AT&T but with less suckage in coverage and 3G as well as a $20.00 a month discount on the service for the 2 years and I'll switch right now.

    I'll jump ship if you make it worth my time.

    and THAT is what they will need to do. make it worth my time to risk a change for a 2 year lock in. I should pay less all the way around if you want my business.

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